We have only a little more than 4 months until the end of 2016. There were stock market crashes in China in the first 1-2 months. There was a referendum in the U.K. in June. Both of them made stock markets in many countries crash. Is it possible that we have something like these in the last 4 months of 2016? If it is, what could be a cause of the next crash?

Risks are in China and Europe

Many stock markets in the world were bullish until mid-2015. The Shanghai stock market surged between late-2014 and early-2015. The German stock market also soared around the time when the ECB announced QE policies in spring of 2015.

But the bubble of Shanghai stock market suddenly collapsed in June 2015. That caused crashes in many stock markets like, Japanese, German and even American in summer. The same crashes, starting in China, happened at the beginning of 2016, in January and February.

Japanese yen surged after February as risk-aversion movement. USD/JPY was around 120 until January, but started falling rapidly in February and is around 100 at the end of July.

Now we are in summer vacation season. We have a little more than 4 months until the end of 2016. There was a British referendum in June as planned which caused another stock market crash. But crashes at that time did not last long.

However, there are some factors which could cause another crash in the last 4 months of 2016. One of them, for example, is China again. Even though the Chinese stock market crashed only in January, the Chinese economy keeps slowing down even after February.

The GDP growth rate of China in 2016 April-June quarter is 6.7%. But as economic indicators released by China are not so accurate, the real figure might be 2-3%, or even negative. No one knows the real figure. Economic slowdown of China might become a serious problem in the near future.

There are risk factors in Europe, too. The U.K. has decided to leave the EU. This is going to be a serious blow to both the U.K. and the EU. Some parties are calling for a referendum in some other countries.

They say that some financial institutions in the EU like Deutsche Bank have serious financial problems. Negative interest rate policies by the ECB are keeping loaning interest and bond yields extremely low and reducing profit of European banks. If one of major European banks goes bankrupt, it could be another Lehman Brothers.

Also, the refugee problem of Europe is not completely solved, yet. As we have talked so far, we have some risks in China, the EU, and also in some other countries in the last 4 months of 2016.